"The impact will be with us for a while, with 51% of SMEs saying they thought the worst effects of the pandemic were still to come."
Nearly half of SMEs (46%) reported sales falling more than 50% already with an expectation of a similar reduction, or indeed no sales, in the coming months. As a result, the proportion planning to grow has halved from 52% in 2019 to 24% in Q2 2020.
More than half of busines owners thought the worst effects of the pandemic on business were still to come, including 63% in the construction sector, and 51% rated their mood about their business as ‘poor’.
Use of external finance fell to 30% in Q2 2020, the lowest level recorded to date, and levels of concern about their ability to repay current borrowing increased. 29% of those using finance were concerned about their ability to repay, up from 14% in Q1. There were more reports of alternatives such as credit balances and injections of personal funds into the business.
More SMEs were feeling cautious due to an uncertain future, but 1 in 3 agreed they were prepared to borrow to see their business though the pandemic.
Appetite for finance remains higher than previously seen and the proportion approaching their bank for pandemic related funding has increased slightly to 14%. Fewer SMEs are still waiting to hear about their application and success rates for those who have heard remain high (94% from main bank and 86% from another provider).
Shiona Davies, director at BVA BDRC, commented: “The latest Monitor results give the clearest indication yet of the struggles faced by businesses. It is not a surprise to see such a fall in SME growth ambitions given the dramatic impact Covid-19 has had on all our lives.
"The impact will be with us for a while, with 51% of SMEs saying they thought the worst effects of the pandemic were still to come. To mitigate the effects of the virus 53% of SME employers have used the Furlough scheme and there has been an increase in innovation (to 42%) as SMEs seek to re-imagine their business. Use of external finance has fallen to the lowest level to date on the SME Finance Monitor, but more SMEs are holding £10,000 or more of credit balances and there are early signs of use of finance starting to increase again with high success rates for more recent applications for government backed funding.”
